My wife and I have come up with a good way to determine whether to insure something. You ask yourself whether you would be OK if it blew up.
Car
If my car blew up, it would be fine because I drive an MRAP. Just kidding. However, its value is under $1000, so it wouldn’t be a problem. Therefore I don’t insure it against damage. In the case where it blew up next to another car and caused damaged then I would care because the Ferrari owner is going to be pretty displeased. Therefore I insure it against damage it causes to others. Likewise if it blew up while I was in the car it would be great to have medical insurance and be an organ donor. Check and check.
House
If the house blew up it would be terrible. If a bounce house blows up it is fun. I have homeowner’s insurance, which is also a requirement from my lender, to make sure I am not in serious debt and without an asset. Things get a bit more complicated because you have the opportunity to insure your belongings, so now you have to imagine each thing in your house getting blown up. I have insurance for replacement value of my belongings up to $300,000. I’m going to reduce that next time, because I doubt I own $20,000 worth of stuff.
Body parts
If my hand blew up I would need urgent medical attention. The ambulance ride (to Area 51) alone costs around $5,000 before they attempt any medical probing or procedures. You never know what will happen to your health and therefore I super strong recommend having health insurance. It can certainly be expensive, but if something happens it is worth it.
Purchasing
If you are making a purchase of something that doesn’t pass the blow it up test and you think you would like to insure it, consider a few things.
- Do you need it?
- Is there a cheaper alternative that would be satisfactory?
- Are you factoring in the costs of insurance and depreciation?
- Can you rent it?
- Do you really need it?
Then if you still need it, shop around for insurance so you get the best deals.
Conclusion
I really hope your stuff doesn’t get blown up, lost, or stolen, but you should be prepared in those cases.